An inadequate budget in times of crisis

First it was the Chamber of Commerce criticising Luxembourg's 2012 draft budget, now it’s the turn of the Court of Auditors to be very critical of the proposed plans and advises reduced spending.

14.03.2012

(lc/ADW) First it was the Chamber of Commerce criticising Luxembourg's 2012 draft budget, now it’s the turn of the Court of Auditors to be very critical of the proposed plans and advises reduced spending.

"Uncertainties in global economy should encourage the government to rethink all expenses, capital expenditure included," said the Court of Auditors in its opinion of the draft budget for 2012.

The institution is concerned that public debt could rise sharply in coming years.

Lower revenues and higher spending

The Court questions estimates of income and expenses. The prospect of an 11% increase in revenue is challenged by the downward revision of growth forecasts by Statec. However, expenditure is on the increase, criticism that echoes concerns voiced by the Chamber of Commerce.

The Court regrets that the Government has not adhered to stricter spending; they appear to be rising faster than revenues, especially with the resumption of projects that had been frozen in 2010. In addition, reforms to ensure long-term control of these expenses have not been implemented, said the Court.

The result is the balance of 75% cost reduction and 25% tax increase model that was in place for 2011 will no longer be respected, said the financial institution. It recommends following the example of Switzerland who elected to cut spending in times of crisis.